Is Free Trade Worth the Cost? (Video discussion)

For FASH455 students: Please share your reflections on the video regarding the free trade debate. You can focus on analyzing 1-2 specific debates raised in the video (e.g., comparing the arguments from both sides) and then share your thoughts. Please do not simply state your “opinion,” but use examples, statistics, or trade theories we learned to support your viewpoint.

Further reading: Is Free Trade Worth the Cost?

Author: Sheng Lu

Professor @ University of Delaware

One thought on “Is Free Trade Worth the Cost? (Video discussion)”

  1. Those who don’t support free trade often remind us of the jobs lost and areas, even entire towns, affected by the closing of companies no longer able to compete with imports or by factories that are moved overseas. This is true and, of course, unfortunate. However, those who support free trade say things would be worse without free trade. They point out that trading has actually created new jobs (20% of jobs are related to international trade), but restricting trade can cause job loss in the long run by increasing prices (1000 jobs gained from steel and aluminum production vs 75,000 industrial jobs lost when steel prices rose). Supporters also point out other benefits of trade: the country’s increased growth and wealth, increased incomes, high quality goods, and lower prices from competition. I think free trade has become a necessity in today’s world. Not all countries have the resources to produce all they need, or to produce it well. Some countries will not have an absolute advantage in producing goods. International trade allows countries to specialize in the products that they have a comparative advantage, or less of a disadvantage, in (comparative advantage trade theory). Countries that are capital-intensive are freed up to invest in machinery and technology to produce certain goods (in T&A industry, textiles) when countries that are labor-intensive produce other non-high technology and machinery goods (in T&A industry, apparel). Then they can trade: capital-intensive goods for labor-intensive goods (factor proportions theory). I think the real question is not ‘is free trade worth the cost?’ I think some questions we need to consider are questions such as ‘who should we trade with?’, ‘to what extent do we trade?’, ‘who/where/what should we invest in?’, ‘are countries we are trading with allowing everyone in their country to benefit?’, and ‘does increased income from trading come at a cost in some countries?’. When we are considering international trade, we should take into consideration political, social, and environmental concerns.

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